With online stock trading, external influences could play a part in the condition of your stocks. A perfect example is Brexit.
Brexit has plunged American stocks as well. Dow was down nearly 900 points in just two days. This follows the path of many global markets, as the fallout from Brexit continues to make its presence felt in the world markets. This is the worst two-day drop in US stocks since August 2015.
British and European Stock Markets under Pressure
European stock markets were under massive pressure as you would expect, with the pound dropping to a new low on Monday after Britain’s vote to exit the European Union. It traded below $1.32 and dropped 3.5% against the dollar. To compound the woes, Standard & Poor downgraded Britain by two notches, citing the Brexit referendum result. It warned that the Brexit vote will fuel uncertainty, discourage investment in Britain, hurt the UK economy and make it tougher for the country to finance its huge debt load. This added to the already depressed market sentiment.
Primarily made up of British mid-sized companies, the FTSE 250 shed 7%, while the stock market of Ireland, UK’s major trading partner, plummeted by 9.5%. The London, Paris and Frankfurt benchmark indexes lost in the region of 2.5% to 3%. The big banks suffered, with Barclays and RBS shares halted for a brief period in London on account of extreme selling. On Monday Barclays’ US-listed shares were down 21%, off by over one-third since the announcement of Brexit results.
The Asian stock markets had a bit of a less extreme reaction, with most of them closing a bit higher on Monday following the immediate aftermath on Friday. Japan’s Nikkei gained 2.4% and managed to claw back the nearly 8% loss posted by the index on Friday.
Further Uncertainty Caused by Delay in Article 50
One of the reasons for the exacerbation of the uncertainty is the delay in the UK actually triggering the move out of the EU. Article 50 needs to be set in motion for the UK to formally start the exit process out of the EU. But Prime Minister David Cameron, who announced his resignation, said he would not trigger Article 50 but would leave the task to his successor. That indicates the uncertainty is set to continue.
The only advantage of a weak pound is that it could boost exports for the UK. But that isn’t much of a silver lining when considering the disadvantages such as rising prices which could make the country unattractive for investors. That means the investors could begin to pull the money out, which could make it tougher for Britain to fund its current account deficit.
Stock market experts will be looking out for each and every movement in the British and European economic scene with regard to Brexit, since these could affect the US stock market as well. With reliable online brokers like TradeZero, you will have all the resources at hand to make the right decisions.
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